McClatchy and the unions

McClatchy’s had a long and tumultuous history with unions, so perhaps it’s not surprising that of the 12 major Knight Ridder papers that McClatchy is selling off, nine have contracts with media unions. Of those McClatchy kept, only one was union represented, and its contract only covered the editorial staff, said Linda Foley, president of the Newspaper Guild, a union covering more than 34,000 members of the media in the United States and beyond.

“They’re not keeping the ones with strong unions,” said Foley.

“I think McClatchy had a long and benevolent relationship with the unions until the late ’70s,” explained Doug Cuthbertson, executive officer with the Northern California Media Workers Guild. That’s when a strike at the Sacramento Bee fractured the peace and sent the unions and McClatchy management diving to opposite corners. After years of contentious negotiating and accusations of union-busting, the unions and McClatchy reconciled. But the union never regained its former strength.

“We really had a tough time at the bargaining table,” said Cuthbertson, who’s been a full-time officer with the union for 36 years. “We have agreements now, but they’re not as good. They used to meet the wages and conditions of the San Francisco papers.”

The Bee papers only dole out merit raises now, which are subjectively distributed, said Cuthbertson. “Vacations are not as good anymore,” he added. “By calling some reporters ‘senior writers,’ they avoid paying them overtime.”

In a press release, McClatchy attributed the sale of these 12 papers not to union contracts but to simple economics: “McClatchy intends to divest 12 Knight Ridder newspapers, mainly located in cities that do not fit the company’s longstanding acquisition criteria, chiefly involving growing markets.”

But William Dean Singleton, owner of MediaNews Group, claimed to be buying four of those 12 papers because of their growth potential: “Given the growth characteristics of these newspapers … we believe this transaction represents a wonderful opportunity at a fair price.”

“Obviously, McClatchy’s requirements are very different than MediaNews’,” said Christina Stenson, McClatchy’s spokesperson for the Knight Ridder deal.

“We do not sit down and say which are union papers and which are non-union papers,” said Howard Weaver, McClatchy’s vice president of news. The company looks instead, he said, at everything from a region’s household-growth rate to its retail-sales rate to its education levels when deciding which papers to buy or sell. He said he hadn’t paid much attention to whether or not the company was selling off union papers because union representation wasn’t a major consideration. “If it’s true,” he said, “that’s an artifact of other criteria.”

If union representation were a deal breaker, then McClatchy wouldn’t have bought its largest paper, the Star Tribune in Minneapolis, said Weaver, where approximately 60 percent of the staff are under contract.

But profit certainly was a priority, as Stenson confirmed, and analysis by Morgan Stanley showed that the union papers had lower profit margins than the ones McClatchy kept. The St. Paul Pioneer Press had an estimated operating profit of 10 percent for 2005; the San Jose Mercury News was estimated at 8 percent.

In March, the New York Times reported that the Knight Ridder papers McClatchy kept maintained an average profit margin of 12 percent. In the online version of that story, the numbers have been revised in a correction that read, “An article in Business Day … misstated the average operating profit margin at the papers McClatchy is keeping. It is 30.3 percent, McClatchy said, not 12 percent.”

That’s before taxes and depreciation, said Pat Talamantes, vice president of finance and chief financial officer for McClatchy.

By way of explaining the huge difference in profit, Griff Palmer, database editor for the San Jose Mercury News and secretary-treasurer of the San Jose Newspaper Guild, said, “Any place with a strong Guild contract will have higher operating costs.”

McClatchy’s decision to sell 12 of its new papers shocked employees of prize-winning papers like the San Jose Mercury News and the Philadelphia Inquirer, who found themselves on the block again immediately after being bought by McClatchy. Palmer claimed that employees had been really excited when McClatchy bought them. They weren’t bothered by the company’s history with the unions.

“[McClatchy] couldn’t have been more adversarial than Knight Ridder,” said Palmer.

Before the sale to MediaNews Group, the Newspaper Guild actually had hoped to beat other buyers to the punch and secure the purchase of all 12 papers in a deal that would not only preserve strong union representation but also take it one step further, to employee ownership.

Before MediaNews snapped up the Merc, the Contra Costa Times, the Monterey Herald and the St. Paul Pioneer Press, the Newspaper Guild hired consultants to find a buyer who could write one big fat check for all 12 papers, explained Luther Jackson, executive officer of the San Jose Newspaper Guild.

“Several months later, employees would be given the opportunity to take a stake,” said Jackson. If enough decided to roll a portion of their 401(k)s into company stock, the new company would earn tax credits, and employees would earn a larger voice in the running of the company. “Maybe even a seat on the board of directors,” said Jackson.

Not all employees embraced this idea. “There was a mixed reaction within the newsroom,” said Palmer, with some employees convinced the paper would be “more economically secure under Singleton.”

The Guild’s advisers did find an investor with deep enough pockets to write that one check. Ron Burkle’s Yucaipa Companies started with supermarkets but has expanded over the years. The company’s never bought a newspaper before, but was ready to change that.

Yucaipa bid $2.2 billion for all 12 papers, according to Palmer, but “had the sense early on that McClatchy was trying to shut them out.”

Weaver said he could not discuss the bidding process at all, but did say, “People who participated in the first round of due diligence had information that other people didn’t have.”

Jackson said he understood that McClatchy was looking for a fast turnover, and MediaNews already had gathered financials because they too had been interested in buying Knight Ridder.

McClatchy went with MediaNews Group’s $1 billion bid for four papers, including the Mercury News.

Though Yucaipa representatives did not return calls for comment, the guilds believe the company is still interested in the remaining eight papers—and not exactly giving up on the four that were recently purchased by MediaNews Group. Numerous media watchdogs are calling for an investigation of the McClatchy/MediaNews Group deal, which will bring almost every daily paper in the Bay Area into the hands of massive media conglomerates.

“To have a market that is completely covered by this deal smacks of cartel-like behavior,” said Foley. “If it requires more than a routine review [by the Department of Justice], is it in the public interest for this transaction to go forward?” she asked.

While investigations get under way, people like Cuthbertson are still thinking that union representation had a lot to do with the fate of the 12 papers McClatchy has decided to sell.

“Oh, absolutely,” he said. “It would be too coincidental to line up the ones they sold and see all the ones that had Guild contracts.”